Mortgage Servicer Agrees to $9 Million Settlement in North Carolina ‘Pay-to-Pay’ Fee Class Action
Case Snapshot
- Court: U.S. District Court for the Middle District of North Carolina
- Case: Custer v. Dovenmuehle Mortgage, Inc.
- Core Issue: Alleged unlawful “pay-to-pay” mortgage servicing fees charged to borrowers making payments by phone or IVR system
- Key Allegation: Borrowers were allegedly charged fees up to $11.50 for mortgage payments made by phone or IVR system without proper authorization under state law
- Court Holding: No merits ruling issued; parties moved for preliminary approval of proposed settlement
- Outcome: Proposed $9 million class settlement submitted for court approval
- Notable Detail: Settlement would automatically distribute funds to class members and prohibit the servicer from charging the disputed fees in North Carolina for at least five years
A mortgage servicer has agreed to a proposed $9 million class action settlement resolving allegations that it improperly charged North Carolina borrowers “pay-to-pay” fees for making mortgage payments by phone or interactive voice response systems.
The proposed settlement, filed May 6 in the U.S. District Court for the Middle District of North Carolina, would resolve claims against Dovenmuehle Mortgage, Inc. stemming from allegations that the company violated North Carolina consumer protection laws by charging borrowers fees of up to $11.50 to make mortgage payments by phone or IVR system.
According to the plaintiff, the fees violated the North Carolina Debt Collection Act and the North Carolina Unfair and Deceptive Trade Practices Act because the charges were allegedly not authorized under borrowers’ mortgage agreements and exceeded the servicer’s actual processing costs.
The settlement would establish a $9 million common fund for affected borrowers and require Dovenmuehle to stop collecting pay-to-pay fees from North Carolina borrowers for at least five years unless state law changes to expressly authorize the charges.
Settlement Would Provide Automatic Payments
The proposed settlement class includes borrowers with residential mortgage loans secured by property in North Carolina who paid a pay-to-pay fee to Dovenmuehle by telephone or IVR system between April 10, 2020, and Jan. 13, 2026.
Court filings state the settlement covers 13,427 identified transactions. Borrowers would not need to submit claim forms to receive compensation because the servicer already provided transaction data and borrower contact information to the settlement administrator.
Plaintiff’s counsel stated the recovery represents approximately $670 per fee paid, describing it as one of the largest recoveries in a pay-to-pay fee settlement on a per-fee basis.
The settlement administrator would distribute funds through electronic payments or mailed checks, with secondary distributions planned if funds remain after the initial payments.
Litigation Followed Two Years of Discovery and Motion Practice
The litigation began in April 2024. The court denied Dovenmuehle’s motion to dismiss in October 2024, and the parties proceeded through extensive discovery, depositions, mediation sessions, class certification briefing, and cross-motions for summary judgment.
The court certified the class in December 2025.
According to the filing, the parties participated in multiple mediation sessions, including two eight-hour mediations before retired federal judge Gerald Rosen in Chicago during March 2026, before reaching an agreement on the settlement terms.
The filing states Dovenmuehle denies wrongdoing but does not oppose preliminary approval of the settlement.
Why It Matters
The proposed settlement adds to a growing body of litigation targeting “pay-to-pay” fees in mortgage servicing and consumer finance.
Consumer plaintiffs have increasingly challenged convenience fees charged for phone and electronic payments, particularly where the fees are allegedly not expressly authorized by underlying loan agreements or where plaintiffs claim the fees substantially exceed actual processing costs.
The case may increase scrutiny on how mortgage servicers structure payment channels, disclose convenience fees, and evaluate state law restrictions governing ancillary servicing charges.
The settlement’s five-year prohibition on charging the disputed fees in North Carolina could also influence servicing practices beyond the state as companies assess litigation exposure tied to payment processing fees.
